Sales tax revenue is starting to indicate slowing economic trends in Austin, according to city-hired analysts, creating anxiety for some elected officials.

“When the economy grows, more jobs [become available], more income, in theory, [is brought in] and more money is available to spend locally,” said Jon Hockeynos, TXP Economic Strategies president, during a financial forecast and economic outlook presentation at the April 19 City Council budget work session.

Hockeynos said sales tax collections in Austin are trending downward but are leveling off to some degree. He attributes that to slower growth nationally in sales tax and job growth.

“The [Austin] economy is still growing—but at a fairly slow pace—in a positive direction, and most of that is driven by consumer spending,” Hockeynos said. “Consumer spending, retail sales and housing are all growing slowly in most parts of the country right now.”

An affordability review project conducted by the Austin city auditor showed housing, for renters and homeowners, as the most expensive cost driver for residents in Southwest Austin. Transportation and food were second and third, respectively.

City officials estimate a 4.3 percent sales tax growth rate for fiscal year 2016-17, which is below the budgeted rate of 5.4 percent.

“Right now, we’re trailing our budgeted growth rate by 1.1 percent,” deputy Chief Financial Officer Ed Van Eenoo said. “That translates to about $2.4 million. We’re a little bit behind overall.”

Although job growth is still occurring at a healthy rate, Hockeynos said he believes the pace to be unsustainable

Austin’s job market continues to grow at a rate between 4 and 5 percent annually, according to Drew Scheberle, Greater Austin Chamber of Commerce vice president of advocacy.

Scheberle said a total of 28,000 more jobs were created in Austin last year, and about 10,000 people were listed as unemployed.

“Job growth here is red-hot,” Scheberle said. “We are one of the top markets and large metro areas for 2016.”

Strong housing market

The strength of the housing market has a significant effect on the economy, Realty Austin Southwest and Dripping Springs Market Manager Marc Warshawsky said.

“If builders are building, that’s creating jobs, which is creating mobility for people moving in and out of the area,” Warshawsky said. “If people are moving in, they are buying furniture and TVs and, in theory, are contributing to the tax base.”

The housing market is tight, according to Warshawsky, and the economy is strong—a trend that has continued into 2017.

“This year is stronger if not equal to last year,” he said. “Houses are selling on average very quickly. Days on the market is low. There’s lots of competition and multiple offers, which is driving prices up, oftentimes beyond what houses are being appraised for based on fair market value.”

In real estate, Warshawsky said supply and demand is another factor in tight housing market trends.

“A strong economy and supply and demand coupled together result in strong appreciation in our market, which is good for some but not for low-income families,” he said. “For low-income families, it flies against affordability which drives people further out on the perimeter of the Greater Austin area.”

Retail on a steady incline

Retail store owners in the Southwest Austin area remain positive about the market.

Sitric House & Home, 3401 W. Slaughter Lane, Austin, has been in business for nine years. Buyer Paula Campbell feels the shop has a strong local following. Owner Margaret McGettrick said that is because customers appreciate their unique products.

“We have remained strong because we offer items that are atypical from mainstream department stores,” she said.

The business sells various gifts, such as candles, jewelry and home and garden decor, as well as offers custom home remodeling services.

“I think our price range is very affordable, but [our products are] good quality,” Campbell said.

Overall, Campbell said, the store increases sales by about 10 percent each year.

Mike Lopez, owner of Austin Gift Company, 4211 S. Lamar Blvd., Ste. A19, Austin, shared a similar sentiment about his customer base, which has ensured a steady flow of sales, he said. Austin Gift Company has been in business for 17 years and has 140 vendors.

“We are the biggest gift shop in Austin,” Lopez said. “We have people from all over the world come in here every day.”

He said the shop’s south-central location also drives sales.

“This is a busy area in South Austin,” Lopez said. “We are a huge tourist destination in the summer, and we are also a straight shot to the airport.”

Lopez said the busiest time of year is Christmas, with 40 percent of sales coming from purchases in November and December, but business remains strong throughout the year.

“We grow on average 8 to 10 percent a year,” Lopez said.

Austin tourism trends up

Hockeynos said tourism in Austin is very strong and is a major generator for sales tax revenue for the city.

Katherine Wise, spokesperson for Visit Austin, the city’s tourism department—known until April 2017 as the Austin Convention & Visitors Bureau— said the number of people who visit the city increases every year.

In 2014, Wise said the city collected $6.7 billion in tourism dollars and in 2015, the city collected $7 billion in tourism revenue.

“In 2016, March, April, June and October were our peak months in Austin; however, our market maintains a very strong demand throughout the year,” Wise said. “March and October are event-driven because of SXSW [South by Southwest] and ACL [Austin City Limits] Fest as well as Formula 1 United States Grand Prix. Austin’s slow [tourism] months were January, August and December, which is typical in a lot of markets.”

Collection forecast

Van Eenoo said sales tax revenue makes up about 23 percent of the general fund revenue.

With sales tax projections below budget, he encouraged the City Council to be more conservative for the next budget.

“When sales tax revenues come in above our projections, that extra revenue falls into our reserves and gives us some ability to fund one-time initiatives in the next budget cycle,” Van Eenoo said. “But, when our revenues fall short of those projections, the opposite happens.”